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Transferring unused nil rate band for IHT

Transferring unused nil rate band for IHT

25 April 2024

The Inheritance Tax residence nil rate band (RNRB) is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death.

Married couples and civil partners can transfer the Inheritance Tax (IHT) residence nil rate band (RNRB) when they pass on their main residence to a direct descendent, such as children or grandchildren, after their death.

The government increased the allowance to its current maximum level of £175,000 on 6 April 2020. The deceased person’s children or grandchildren can claim this allowance. If a surviving spouse or partner exists, they can receive any unused portion of the RNRB. This RNRB comes in addition to the existing £325,000 Inheritance Tax nil-rate band.

When combined with the current IHT limit of £325,000, married couples and civil partners can pass on property worth up to £1 million, free of any Inheritance Tax liability, to their direct descendants.

The executor must claim the transfer of the unused RNRB from HMRC when the second spouse or civil partner dies. This claim transfers the unused RNRB from the estate of the spouse or civil partner who died first. This transfer can occur even if the first spouse or civil partner died before the introduction of the RNRB on 6 April 2017.

If an estate’s value exceeds £2 million, the RNRB tapers. This applies even when the family home goes to direct descendants. The additional threshold reduces by £1 for every £2 that the estate value exceeds the £2 million taper threshold. This reduction can result in the full amount of the RNRB being tapered away. The RNRB maximum rate and the taper threshold will remain frozen until at least April 2028.

Source: HM Revenue & Customs Mon, 22 Apr 2024 00:00:00 +0100

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